Question

Aggregate supply increases when

a. there is a decrease in firms market power
b. subsidies are reduced
c. business expectations are pessimistic
d. input prices rise

Answer 1

Aggregate supply increases when input prices rise. When the prices of inputs, such as labor and energy products, increase, it becomes more expensive for businesses to produce goods and services.

Step-by-step explanation:

Aggregate supply increases when input prices rise. When the prices of inputs, such as labor and energy products, increase, it becomes more expensive for businesses to produce goods and services. As a result, businesses may reduce their production output, leading to a decrease in aggregate supply. For example, if the price of oil increases, it would raise the costs of production for many industries and result in a decrease in their supply.